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Retirement Plan SelectionHRM 324September 10, 2018Steven HartmanIntroduction
Employees have different options when it comes to retirement plans depending on what type of industry they work in. Employees need to understand how the retirement plan works, that’s offered to them and what percentage the employer will be contributing to the plan. Employees’ have to be aware that Social Security will not be sufficient, or it may no longer be available when they retire, so planning ahead for their retirement is essential for what type of lifestyle they would like to have when they retire. Based on the scenario that was provided of a 24-year-old new hire that’s earning $40,000.00 a year and she wants to retire at the age of 60 with 3 million dollars in her retirement account, we will analyze what her options are, and how she will be able to reach her retirement goals.403(b)Nonprofit organizations offer this type of retirement plan is a 403(b) Plan, and employeeshave control over how much they would like to contribute to their plans just like in a 401(k) Plan. These contributions can range from 1% of gross, pre-tax income to a maximum of 6%. Organizations that offer an additional contribution to the employee's retirement plan, they can match up to 4% or up to 5% of the employee’s incomeDuring the time she is employed in the organization, if the organization offers employer contribution, she should take full advantage of this additional funds provided to her retirement plan. Basically, this is free capital that will go to her 403(b). She needs to analyze her budget andsee if she can afford to put the maximum of 6% toward her 403(b), and take advantage of the max the organization contributes to the employees 403(b), these funds can add up fast.What is a 403 (b) And how does it work, basically a 403(b) Is for non-profits organization for the following industries, schools, hospitals, and religious groups, this type of
industries are particular types of tax-exempt. The 403(b) allows the employee to make tax-deferred deductions from their payroll check, and also 401(k) have the same withdrawal rules as reported by the IRS. Also, the 403(b) plans may only offer mutual funds and annuities.